After 20 years, Chinese bank forced to close its doors

Editor’s note: This story was chosen as one of our top 12 in 2010. After running a story about how Washington First International Bank (WFIB) was weathering the financial storm relatively well earlier in the year, we (and the community) were shocked to learn that WFIB was closing its doors in June. Though East West Bank bought WFIB’s four branch properties in the Greater Seattle area, the International District branch remains vacant. The loss of WFIB will continue to be a big loss to the community.

By Stacy Nguyen and Assunta Ng
Northwest Asian Weekly

The facade of the Washington First International Bank looks the same as it has for years, but as East West settles into its new home, it will change. (Photos by Rebecca Ip/SCP)

On Friday, June 11, the Washington Department of Financial Institutions closed Seattle-based Washington First International Bank (WFIB) because it didn’t have enough capital.

The Federal Deposit Insurance Corporation (FDIC) was appointed receiver. East West Bancorp, from Pasadena, Calif., agreed to assume all deposits (except some brokered deposits, which will be paid out by the FDIC) and assets belonging to WFIB, including the property of three branches in Federal Way, Bellevue, and the the International District (ID) in Seattle (the property of the former headquarters in Northgate will not belong to East West because it is a rental). The ID branch of WFIB reopened as East West on Saturday. The three remaining branches opened the following Monday.

The problems

WFIB, which catered to many Asian and Asian American customers, opened in 1990 and, until the third quarter of 2008, was one of the top five commercial banks headquartered in the Greater Seattle area. In the end, it was plagued by the same issue that has forced other banks to close, real estate loans.

With foreclosures on the rise, the bank had been left with too many hard-to-sell properties and the challenge of raising capital. Late last year, the FDIC released a list of financial institutions that were under investigation. WFIB was on the list. In response, WFIB complied with the FDIC’s request to complete a management assessment report.

In January, president and CEO Elizabeth Huang said that the bank aimed to raise $10 to $30 million in addition to a conditional $10 million already raised by shareholders.

Lo-Yu Sun, owner of China Harbor Restaurant and a shareholder with WFIB for 15 years, thought the FDIC was being unfair. “This is the oldest local commercial Chinese-owned bank in our community,” he said. “It’s pretty shocking. Could it be that the FDIC is too strict? I thought the FDIC should help the bank. You should not punish small businesses like this. Elizabeth and Arnold Huang (the founders) worked so hard to make the bank successful.”

In contrast, Sun’s brother Lo-Shan Sun, another shareholder, thinks the FDIC is doing its job. “If the Huangs have been doing everything legally for the bank, the community should not blame them too much. It’s the market. I don’t think the FDIC is harsh; it is trying to protect the consumers, and it is only following rules.”

Brad Williamson, director of the Washington State Department of Financial Institutions’ bank division, doesn’t think the FDIC was being unfair either. He said that a serious conversation between WFIB and federal regulators occurred in April. “They needed to raise capital, or else it’s not a viable business,” said Williamson. The FDIC and the Department of Financial Institutions work closely together to make sure that state financial institutions adhere to all laws.

Williamson said that on March 31, there was a report about the capitalization level of banks and that WFIB had the least capital of any operating bank in Washington state — 1.8 percent.

“We experienced a sharp and prolonged downturn in the real estate markets, which had a huge impact on Washington First International Bank because of our real estate lending concentration,” said Elizabeth Huang. “Management and the board had tried very hard to raise additional capital, and we received strong commitments of new capital of approximately $30 million from a number of investors in China in early June, but ran out of time to meet the regulatory capital requirements deadline. The regulatory rules on qualifying large investors have also made our capital raising efforts more difficult.”

East West representatives, from left: Senior Vice President Emily Yeh, Executive Vice President and Director of Business Banking Andy Yen (in charge of the six branches), President and CEO Dominic Ng, and Senior Vice President and Director of Marketing Emily Wang.

Since the bank was unable to raise the capital, it was faced with either being shut down or having its charter, which authorizes the operation of a bank, taken away. WFIB opted to return the charter to the state because management hoped that returning the charter would provide a time frame outlining when it would need to fully close down.

WFIB International Bank is the 82nd FDIC-insured institution to fail in the nation this year, and the seventh in Washington state.

Getting shut down

“Our 21 years of hard work to build the bank and help the community [are now gone],” said Huang. She said she received a notice on June 8 that the bank was going to be shut down. She notified some management employees but she didn’t know that the FDIC would come in only three days later.

WFIB employees, speaking on conditions of anonymity, said getting shut down was scary, as it wasn’t expected. About 80 people from the FDIC, called the resolution team, went through the branches, taking inventory and looking through records to make sure there were no cases of fraud or illegal activity.

They had state troopers with them, said bank employees. Everyone that came in wore suits and had a role to play. The resolution team interviewed employees and asked about what was going on at the bank, what kind of business was conducted. Employees said the process was intimidating.

Shareholders

Perhaps the biggest losers in the closing of WFIB are the bank’s shareholders, many of whom are Asian Americans. While depositors won’t lose any money, shareholders will.

Shareholders own shares of stock, which represent a fraction of ownership in the business. When the bank closed, the stocks cease to exist.

Huang said that WFIB had about 250 shareholders.

“A founder’s relative asked me to invest,” said Millie Su, a realtor and former WFIB shareholder. “I did it to support the bank. It was all of my personal savings.”

Su’s husband, Dennis, said he was shocked when he heard news of the bank’s closing. “I never thought that the bank will be gone just like that. We didn’t imagined that we could lose [so much] money. I thought a Chinese bank would be safe to invest in, as I assume it’s more conservative in its approach.”

“I saw WFIB grow, and I like Elizabeth Huang. She has lots of integrity,” said Lo-Shan Sun. “We have years of friendship with the Huangs. So I invested when she invited me to be a shareholder. I did not withdraw my money at all. Over the years, I used the dividends to reinvest in the bank so I could leave a legacy for my grandchildren and children. Every year, we received 20 percent in dividends. I never dreamed that the bank would fail. I am very shocked. [But] I am not angry.”

Some shareholders, though, are angry. When asked, they declined to be quote.

The past year has been challenging for many people who own lots of shares in local Asian banks. Investors like the Sus faced double losses as, last November, United Commercial Bank of San Francisco, with locations in Seattle and Bellevue, also closed. It was also taken over by East West.

East West

According to Dominic Ng, CEO and president of East West, the FDIC gave priority to banks that cater to Asians in finding a buyer for WFIB. Ng said the FDIC offered WFIB to East West on June 9. East West only had two days to decide yes or no.

East West plans to keep all WFIB employees. East West met with employees on June 12 to familiarize them with the new system.

There will be two branches of the bank close to one another in the International District. Ng doesn’t necessarily see that as a bad thing.

“If both branches are doing well, why close one?” said Ng. “In California, we have branches across the street from one another, like Starbucks,” he said.

East West, which also caters to Asians, is the largest bank in the nation focused on serving Asian Americans.

With its acquisition of WFIB’s four branches, it now has six branches in the Puget Sound region, which will be overseen by Andy Yen, executive vice president and director of business banking. It is now the largest Asian American bank in Washington state.

“The acquisition of WFIB reflects our commitment to the Asian American community in the Seattle region,” said Ng.

East West has more than $20 billion in assets with more than 130 locations worldwide.

What’s next for the Huangs?

Elizabeth Huang is devastated. She said she can’t think or plan for the future just yet, but she’s trying to get some rest. “I am very touched by the community,” she said. “I have received lots of encouraging e-mails telling me to wait for the next opportunity to work together again.”

Elizabeth and her husband, Arnold, plan to stay in Seattle to settle some issues. ♦

For more information, write to Washington First Financial Group, Inc., at P.O. Box 25453, Seattle WA 98165 or e-mail info@wffgs.com.

Comments

I am disappointed by your coverage of WFIB. Earlier in the year you published an article titled “Washington First Weathers Storm of Controversy with FDIC List”. Now being on the list is a sign of severe financial distress, yet the article paints a picture that all is well. It even quotes Elizabeth Huang as saying that “Our liquidity is strong” and that she is positive that WFIB will rebound quickly . It certainly gives one the impression that the situation is not that serious. Instead of serious probing journalism that would benefit your readers, your paper allowed Huang to promote her agenda.

Then your paper ran a recent story titled “After 20 years, Chinese bank forced to close its doors”. In it, it how some investors lost money and how shocked they were that the bank was forced to close. Huang was quoted saying “Our 21 years of hard work to build the bank and help the community are now gone”.

I feel your story here is totally one sided. I am a veteran banker with many years of commercial lending experience with some of the largest banks in the country. Banks that go belly up usually do so because they have poor or inadequate risk management. They became greedy with the bull market in real estate and assume it will continue forever. They took risks without regard to the consequences. Your article however made it sound as though the economy was the sole cause for the bank’s troubles. The real estate collapse of course had an impact, but banks are supposed to manage their portfolios through changing market conditions. Although we have seen many banks being closed, the vast majority of banks in this country remain sound and are not on the FDIC list. You have to ask why? The reason is because they took prudent risks, avoided over concentration of assets, and had proper risk management procedures. WFIB probably didn’t and your article failed to give a balanced view on the real reasons for the demise of this bank.

[…] This post was mentioned on Twitter by Mark Coble, Maranatha Purcell. Maranatha Purcell said: After 20 years, Chinese bank forced to close its doors: Northwest Asian Weekly When asked, they declined to be quo… http://bit.ly/c0JfgC […]